Respondents Brief — Arthrex, Inc., Petitioner v. Smith & Nephew, Inc., et al.

Nos. 19-1434, 19-1458

IN THE

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UNITED STATES OF AMERICA,

Petitioner,

v.

ARTHREX, INC., ET AL.,

Respondents.

ARTHREX, INC.,

Petitioner,

v.

SMITH & NEPHEW, INC., ET AL.,

Respondents.

On Petitions For Writs Of Certiorari

To The United States Court Of Appeals

For The Federal Circuit

BRIEF FOR RESPONDENTS

SMITH & NEPHEW, INC. AND

ARTHROCARE CORP.

CHARLES T. STEENBURG

NATHAN R. SPEED

RICHARD F. GIUNTA

WOLF, GREENFIELD & SACKS, P.C.

600 Atlantic Avenue

Boston, MA 02210

(617) 646-8000

MARK A. PERRY

Counsel of Record

KELLAM M. CONOVER

BRIAN A. RICHMAN

MAX E. SCHULMAN

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 955-8500

MPerry@gibsondunn.com

Counsel for Respondents

Smith & Nephew, Inc. and ArthroCare Corp.

(Additional Counsel Listed on Inside Cover)

MARK J. GORMAN

SMITH & NEPHEW, INC.

7135 Goodlett Farms Parkway

Cordova, TN 38016

(901) 399-6903

JESSICA A. HUDAK

GIBSON, DUNN & CRUTCHER LLP

3161 Michelson Drive

Irvine, CA 92612

(949) 451-3837

Additional Counsel for Respondents

Smith & Nephew, Inc. and ArthroCare Corp.

QUESTIONS PRESENTED

The questions presented in United States v. Arthrex, Inc., No. 19-1434, are:

1. Whether, for purposes of the Appointments

Clause, U.S. Const. art. II, § 2, cl. 2, administrative patent judges of the U.S. Patent and Trademark Office are principal officers who must be appointed by the President with the Senate’s advice

and consent, or “inferior Officers” whose appointment Congress has permissibly vested in a department head.

2. Whether the court of appeals erred by adjudicating an Appointments Clause challenge

brought by a litigant that had not presented the

challenge to the agency.

The questions presented in Arthrex, Inc. v. Smith

& Nephew, Inc., No. 19-1458, are:

1. Whether the court of appeals’ severance

remedy is consistent with congressional intent.

2. Whether the court of appeals correctly held

that the elimination of APJ tenure protections

was sufficient to render APJs inferior officers.

ii

RULE 29.6 STATEMENT

Pursuant to this Court’s Rule 29.6, respondents

Smith & Nephew, Inc. and ArthroCare Corp. state

that Smith & Nephew PLC is respondents’ parent

corporation and no other publicly held corporation

owns 10% or more of the stock of either respondent.

iii

TABLE OF CONTENTS

Page

BRIEF FOR RESPONDENTS .................................... 1

I.

THE COURT SHOULD GRANT THE

GOVERNMENT’S PETITION ................................ 2

A. The Federal Circuit’s Decision Is

Wrong ....................................................... 2

B. Arthrex’s Forfeiture Raises

Important Issues ...................................... 3

C. The Court Should Grant Certiorari

In Polaris Only If It Reviews Both

Of The Government’s Questions ............. 8

II. THE COURT SHOULD GRANT ARTHREX’S

PETITION ........................................................ 10

A. APJs’ Removal Protections Are

Presumptively Severable ....................... 11

B. The Constitution Does Not Require

Unilateral Review Of Individual

Decisions ................................................. 14

C. The Court Has A Variety Of Tools

To Redress Any Constitutional

Defect ...................................................... 15

CONCLUSION .......................................................... 19

iv

TABLE OF AUTHORITIES

Page(s)

Cases

Barr v. Am. Ass’n of Political Consultants, Inc.,

No. 19-631, 2020 WL 3633780

(U.S. July 6, 2020).......................................... 13, 16

In re Boloro Glob. Ltd.,

963 F.3d 1380 (Fed. Cir. 2020) .............................. 3

Buckley v. Valeo,

424 U.S. 1 (1976) .................................................. 18

Ciena Corp. v. Oyster Optics, LLC,

958 F.3d 1157 (Fed. Cir. 2020) .............................. 5

Edmond v. United States,

520 U.S. 651 (1997) .............................................. 15

Free Enter. Fund v.

Pub. Co. Accounting Oversight Bd.,

561 U.S. 477 (2010) ...................... 11, 12, 14, 16, 17

Freytag v. Comm’r,

501 U.S. 868 (1991) .......................................... 5, 15

Hormel v. Helvering,

312 U.S. 552 (1941) ........................................ 4, 5, 6

Humphrey’s Ex’r v. United States,

295 U.S. 602 (1935) .............................................. 12

Lebron v. Nat’l R.R. Passenger Corp.,

513 U.S. 374 (1995) ................................................ 9

v

TABLE OF AUTHORITIES

(continued)

Page(s)

Lucia v. SEC,

138 S. Ct. 2044 (2018) ...................................... 7, 15

Martin v. Franklin Capital Corp.,

546 U.S. 132 (2005) ................................................ 5

Myers v. United States,

272 U.S. 52 (1926) ................................................ 11

N. Pipeline Constr. Co. v.

Marathon Pipe Line Co.,

458 U.S. 50 (1982) ................................................ 18

Oil States Energy Servs., LLC v.

Greene’s Energy Grp., LLC,

138 S. Ct. 1365 (2018) .................................... 13, 16

Ramspeck v. Fed. Trial Exam’rs Conference,

345 U.S. 128 (1953) .............................................. 12

Ryder v. United States,

515 U.S. 177 (1995) ................................................ 7

Seila Law LLC v. CFPB,

No. 19-7, 2020 WL 3492641

(U.S. June 29, 2020) ................................ 11, 12, 13,

14, 16, 17

Thryv, Inc. v. Click-To-Call Techs., LP,

140 S. Ct. 1367 (2020) .......................................... 13

vi

TABLE OF AUTHORITIES

(continued)

Page(s)

United States v. L.A. Tucker Truck Lines, Inc.,

344 U.S. 33 (1952) .............................................. 4, 7

Ward v. Vill. of Monroeville,

409 U.S. 57 (1972) ................................................ 12

Woodford v. Ngo,

548 U.S. 81 (2006) .................................................. 4

Zivotofsky ex rel. Zivotofsky v. Clinton,

566 U.S. 189 (2012) ................................................ 9

Statutes

5 U.S.C. § 7513 .......................................................... 13

28 U.S.C. § 1295 .......................................................... 3

35 U.S.C. § 3 .................................................... 6, 13, 17

35 U.S.C. § 6 .............................................................. 17

35 U.S.C. § 143 .......................................................... 15

35 U.S.C. § 318 .......................................................... 15

35 U.S.C. § 319 .......................................................... 15

Other Authorities

Arthrex, Inc. v. ArthroCare Corp.,

No. IPR2016-01877

(P.T.A.B. filed Sept. 22, 2016) ............................... 6

vii

TABLE OF AUTHORITIES

(continued)

Page(s)

Arthrex, Inc. v.

Bonutti Skeletal Innovations, LLC,

No. IPR2013-00633, 2014 WL 1877931

(P.T.A.B. May 6, 2014) ........................................... 6

Arthrex, Inc. v. KFx Med., LLC,

No. IPR2016-01697, 2018 WL 1100770

(P.T.A.B. Feb. 26, 2018) ......................................... 6

Arthrex, Inc. v. KFx Med., LLC,

No. IPR2016-01698, 2018 WL 1128523

(P.T.A.B. Feb. 26, 2018) ......................................... 6

Arthrex, Inc. v. Vite Techs., Inc.,

No. IPR2016-00381, Paper 15

(P.T.A.B. Nov. 7, 2016) .......................................... 6

Arthrex, Inc. v. Vite Techs., Inc.,

No. IPR2016-00382, Paper 15

(P.T.A.B. Nov. 7, 2016) .......................................... 6

Pet. for Cert.,

Polaris Innovations Ltd. v.

Kingston Tech. Co., No. 19-1459

(U.S. filed June 30, 2020) ................................ 9, 10

Pet. for Cert.,

Smith & Nephew, Inc. v.

Arthrex, Inc., No. 19-1452

(U.S. filed June 29, 2020) ..................... 1, 3, 4, 7, 8,

9, 13, 14, 15

BRIEF FOR RESPONDENTS

The Federal Circuit held in this case that administrative patent judges (APJs) are principal rather

than inferior Officers of the United States; that severing APJs’ statutory removal protections was sufficient

to cure the Appointments Clause violation; and that

the patent owner is entitled to a new hearing before

different adjudicators notwithstanding its administrative forfeiture. U.S. Pet. App. 22a, 28a–33a.

All parties to that decision—the patent owner Arthrex, Inc. (Arthrex), the challengers Smith &

Nephew, Inc. and ArthroCare Corp. (S&N), and the

United States as intervenor—have petitioned for

writs of certiorari to review the Federal Circuit’s rulings. See Pet. for Cert., United States v. Arthrex, Inc.,

No. 19-1434 (U.S. filed June 25, 2020) (“U.S. Pet.”);

Pet. for Cert., Smith & Nephew, Inc. v. Arthrex, Inc.,

No. 19-1452 (U.S. filed June 29, 2020) (“S&N Pet.”);

Pet. for Cert., Arthrex, Inc. v. Smith & Nephew, Inc.,

No. 19-1458 (U.S. filed June 30, 2020) (“Arthrex

Pet.”). Although the parties have sought review of different aspects of the Federal Circuit’s decision, S&N

agrees that all three petitions should be granted.

The government’s petition primarily challenges

the Federal Circuit’s erroneous ruling that APJs are

principal Officers. See U.S. Pet. 14–26. Its first question presented is substantively the same as S&N’s,

and should be granted for the same reasons. Infra I.A.

S&N also agrees that the ramifications of Arthrex’s

forfeiture are important. Infra I.B. The government’s

suggestion that this Court should review the decisions

in both Arthrex and Polaris is well-taken only if the

2

Court reviews both questions presented in the government’s petition; otherwise, the Court should review

only the Arthrex decision. Infra I.C.

Arthrex devotes its petition to the consequences of

the court of appeals’ ruling that APJs are principal Officers. Arthrex Pet. 25–33. If the Court were to reach

Arthrex’s first question presented, Arthrex has not established error in the Federal Circuit’s ruling that

Congress would have preferred APJs without statutory removal protections to no APJs at all. Infra II.A.

Arthrex’s second question—whether the Federal Circuit cured any Appointments Clause violation by severing APJs’ removal protections—is just another way

of asking what distinguishes principal from inferior

Officers. Infra II.B. And contrary to Arthrex’s view,

this Court has a number of potential alternatives for

prospectively “fixing” any constitutional problems.

Infra II.C. Although S&N disagrees with the premises of Arthrex’s arguments and with Arthrex’s proposed solutions, S&N does not dispute that these are

important issues that should be decided, as and if necessary, after full briefing and argument.

The Court therefore should grant all three petitions for writs of certiorari in the Arthrex case.

I.

COURT

SHOULD

THE

GOVERNMENT’S PETITION.

GRANT

THE

S&N agrees with the United States that the Court

should review the Federal Circuit’s determination

that APJs are principal Officers.

A.

The Federal Circuit’s Decision Is

Wrong.

The government’s first question presented is

whether APJs are principal or inferior Officers under

the Appointments Clause. U.S. Pet. I. This question

3

is substantively identical to the question presented by

S&N’s separate petition for a writ of certiorari. See

S&N Pet. i. And the arguments set forth in Part I of

the government’s petition are congruent with the arguments in S&N’s petition. Compare U.S. Pet. 14–26,

with S&N Pet. 14–27.

S&N will not repeat the government’s arguments

here, but does wish to emphasize that the multiple

opinions entered upon the Federal Circuit’s denial of

rehearing “both evince the need for definitive guidance from this Court and identify a range of potential

analytic approaches for this Court’s consideration.”

U.S. Pet. 16. The principal/inferior Officer distinction

and its ramifications were well explored in the briefing and opinions in this case, and ought to be addressed and resolved by the Court in this case.

The Federal Circuit exercises exclusive jurisdiction over Board decisions, see 28 U.S.C.

§ 1295(a)(4)(A), and that court has extended Arthrex

(which arose in the context of inter partes review) to

other types of post-grant review proceedings, see S&N

Pet. 12, and, most recently, to ex parte examination

appeals, In re Boloro Glob. Ltd., 963 F.3d 1380 (Fed.

Cir. 2020). The decision below thus affects all aspects

of patent practice reviewed by the Board. Because the

underlying Appointments Clause issue will grow no

better developed than it is now, the government’s first

question presented clearly warrants review by this

Court at this time.

B.

Arthrex’s

Forfeiture

Important Issues.

Raises

The government’s second question presented is

whether the court of appeals erred in excusing Arthrex’s failure to raise its Appointments Clause chal-

4

lenge before the Board. U.S. Pet. I. Arthrex’s forfeiture gives rise to two distinct issues: (1) whether the

court of appeals should have reached the merits of the

constitutional challenge at all; and (2) whether Arthrex is entitled to a new hearing before a different

panel of APJs. S&N Pet. 31–33. The former issue is

addressed by the government in the context of its second question presented, U.S. Pet. 26–33; in S&N’s

view, the latter issue is subsumed within the government’s first question presented.

1. The first forfeiture issue is whether the court

of appeals should have reached the merits of Arthrex’s

Appointments Clause challenge. See U.S. Pet. 29–30.

Under established principles of forfeiture, the answer

to that question is “no.” As the government explains,

the court of appeals should not have “unwound the

significant efforts of the agency and the litigants,” id.

at 27, based on an objection that Arthrex failed to

raise before the Board, id. at 29. The Federal Circuit’s

contrary conclusion conflicts with this Court’s teachings and warrants review.

a. This Court has long held that “‘courts should

not topple over administrative decisions unless the

administrative body not only has erred, but has erred

against objection made at the time appropriate under

its practice.’” Woodford v. Ngo, 548 U.S. 81, 90 (2006)

(quoting United States v. L.A. Tucker Truck Lines,

Inc., 344 U.S. 33, 37 (1952)); see also Hormel v. Helvering, 312 U.S. 552, 556–57 (1941) (“[o]rdinarily,” a

court should not consider an issue “neither pressed

nor passed upon by the . . . administrative agency below”). That “general rule” should have resolved this

case and provides an independent basis to vacate the

decision below. L.A. Tucker, 344 U.S. at 37; see U.S.

Pet. 29.

5

To be sure, this Court has held that appellate

courts have “discretion,” in some instances, to consider an Appointments Clause challenge not raised

before the agency. Freytag v. Comm’r, 501 U.S. 868,

879 (1991). The government recognizes as much, U.S.

Pet. 30, and no party asks that Freytag be overruled.

But “[d]iscretion is not whim.” Martin v. Franklin

Capital Corp., 546 U.S. 132, 139 (2005). A court cannot “deviate” from the normal rules of forfeiture—as

the Federal Circuit purported to do here, U.S. Pet.

App. 4a—without first inquiring into the particular

circumstances of each case. Even Freytag expressly

cabined the authority to overlook administrative forfeiture to “rare cases,” 501 U.S. at 879, and the precedent on which it relied was limited to “exceptional

cases or particular circumstances” where “injustice”

would arise from applying the “[o]rdinar[y]” rule of

forfeiture, Helvering, 312 U.S. at 556–57.

b. The Federal Circuit nowhere undertook the

case-specific inquiry mandated by this Court’s teachings. It did just the opposite: None of the justifications it offered—the “important structural interests”

implicated and the “wide-ranging effect on property

rights”—involved Arthrex’s particular circumstances.

U.S. Pet. App. 4a–5a. And the court of appeals has

adopted a blanket policy of affording relief to all patent holders (but not IPR petitioners) who “present[ed] an Appointments Clause challenge on appeal,” id. at 33a, regardless of whether such challenge

had been preserved before the Board, U.S. Pet. 27; see

also, e.g., Ciena Corp. v. Oyster Optics, LLC, 958 F.3d

1157, 1159 (Fed. Cir. 2020).

The particular circumstances of this case, moreover, do not remotely justify relieving Arthrex of the

consequences of its forfeiture. Arthrex has repeatedly

6

sought inter partes review—including against a respondent in this case, see Arthrex, Inc. v. ArthroCare

Corp., No. IPR2016-01877 (P.T.A.B. filed Sept. 22,

2016)—and has even benefited from rulings by the exact panel of APJs who issued the Board’s decision below. Compare U.S. Pet. App. 60a, 83a (APJ panel in

this case), with Arthrex, Inc. v. Vite Techs., Inc., No.

IPR2016-00382, Paper 15 (P.T.A.B. Nov. 7, 2016)

(same panel holding claims challenged by Arthrex to

be unpatentable), and Arthrex, Inc. v. Vite Techs., Inc.,

No. IPR2016-00381, Paper 15 (P.T.A.B. Nov. 7, 2016)

(same).

Arthrex can hardly cast itself as the “victim” of an

administrative process it has employed, for years, to

its own advantage. See, e.g., Arthrex, Inc. v. KFx Med.,

LLC, No. IPR2016-01697, 2018 WL 1100770 (P.T.A.B.

Feb. 26, 2018) (holding claims challenged by Arthrex

unpatentable); Arthrex, Inc. v. KFx Med., LLC, No.

IPR2016-01698, 2018 WL 1128523 (P.T.A.B. Feb. 26,

2018) (same); Arthrex, Inc. v. Bonutti Skeletal Innovations, LLC, No. IPR2013-00633, 2014 WL 1877931

(P.T.A.B. May 6, 2014) (entering judgment for Arthrex). Accordingly, no “injustice” would result from

subjecting Arthrex’s patent to the same procedures

Arthrex has long invoked against patents owned by

others. Helvering, 312 U.S. at 556–57.

Raising the Appointments Clause challenge before the Board would not have been “futile,” as the

panel erroneously believed. U.S. Pet. App. 30a; see

U.S. Pet. 32–33. For example, had Arthrex made a

timely challenge, the Director could have assigned

himself and the two Commissioners—who are all effectively removable at will, see 35 U.S.C. § 3(a)(4),

(b)(2)(C)—to preside over Arthrex’s case.

7

There is, in short, no reason to relieve Arthrex of

its obligation to raise arguments in the same manner

as other litigants and to suffer the same consequences

for its forfeiture.

2. The second issue raised by Arthrex’s forfeiture

is what case-specific remedy, if any, Arthrex itself can

receive in light of its failure to preserve its constitutional challenge before the agency. See U.S. Pet. App.

32a–33a. The Court can address this issue whether

or not it grants certiorari on the government’s second

question. See S&N Pet. 32; cf. Lucia v. SEC, 138 S. Ct.

2044, 2055 (2018) (addressing challenger-specific

remedy after granting certiorari on merits of Appointments Clause challenge).

The remedy for a successful Appointments Clause

challenge must be “appropriate” in light of the circumstances of the particular case. Ryder v. United States,

515 U.S. 177, 183 (1995). Even where a defect in an

agency adjudicator’s appointment “would [have] invalidate[d] a resulting order . . . had . . . an appropriate objection [been] made during the [agency] hearings,” this Court has refused to “set aside” the adjudicator’s work in the absence of such a “timely objection.” L.A. Tucker, 344 U.S. at 38.

A new hearing before a different adjudicator is appropriate only for a party who makes a “timely” Appointments Clause challenge. Lucia, 138 S. Ct. at

2055; Ryder, 515 U.S. at 182; L.A. Tucker, 344 U.S. at

38. Arthrex’s challenge was not “timely” because it

was not pressed “before the [agency].” Lucia, 138

S. Ct. at 2055; see also Ryder, 515 U.S. at 182. By nevertheless ordering a new hearing before a different adjudicator, the Federal Circuit gave Arthrex an undeserved windfall, while imposing unwarranted burdens

on both the Board (which adjudicated patentability on

8

the merits without objection) and S&N (which prevailed in that adjudication). Arthrex should therefore

be limited to, at most, declaratory relief. S&N Pet.

32–33.

C.

The Court Should Grant Certiorari In

Polaris Only If It Reviews Both Of The

Government’s Questions.

The government suggests that the Court should

review both Arthrex and Polaris. U.S. Pet. 33–34.

S&N agrees that the Court should grant certiorari in

both cases if (and only if) it elects to review both of the

questions presented in the government’s petition.

Otherwise, the Court should grant certiorari only in

Arthrex.

1. If the Court reviews both questions presented

by the government, it should grant certiorari in both

Arthrex and Polaris. As the government explains, “[i]f

the Court granted review only in Arthrex, . . . it might

not reach the Appointments Clause question because

it might first address and reverse the Federal Circuit’s decision to excuse Arthrex’s administrative forfeiture.” U.S. Pet. 33–34. Polaris thus would be

needed as a backup vehicle to ensure the Court can

decide next Term whether APJs are principal or inferior Officers. See ibid.

Because Polaris would come into play in these circumstances only if the Court were to reverse the Federal Circuit’s decision to reach the merits of the Appointments Clause issue despite Arthrex’s forfeiture,

S&N respectfully submits that the Court should designate Arthrex as the principal case. Whereas Arthrex

involved five considered opinions exploring all aspects

of that issue, see S&N Pet. 30–31, Polaris was disposed of by a per curiam summary order that cited to

Arthrex, see U.S. Pet. 12.

9

2. If the Court reviews only one of the government’s two questions presented, there would be no

need to grant certiorari in Polaris.

Obviously, if the Court reviews only the government’s forfeiture question, there would be no reason

to review Polaris because only “Arthrex presents both

the constitutional and forfeiture issues,” while “Polaris presents only the Appointments Clause issue.”

U.S. Pet. 33–34; see also S&N Pet. 33.

If the Court reviews only the government’s principal/inferior Officer question, there still would be no

need to review Polaris. Arthrex squarely presents

that issue, as well as a robust suite of competing decisions on that issue. Cf. Zivotofsky ex rel. Zivotofsky v.

Clinton, 566 U.S. 189, 201 (2012) (preferring “the benefit of thorough lower court opinions to guide [the

Court’s] analysis”). Polaris is redundant of Arthrex on

the principal/inferior Officer question, and Arthrex is

a manifestly better vehicle.

Even though Arthrex failed to raise its Appointments Clause challenge before the Board, that would

be no obstacle to this Court’s ability to review that

challenge. S&N Pet. 32. Because the Appointments

Clause question was “‘addressed by the court below,’”

this Court is “‘free to address it.’” Lebron v. Nat’l R.R.

Passenger Corp., 513 U.S. 374, 379 (1995) (citation

omitted). Moreover, because only “Arthrex presents

. . . [the] forfeiture issue[ ],” U.S. Pet. 33, only Arthrex

gives the Court the opportunity to decide what effect,

if any, Arthrex’s forfeiture has on the remedy, see supra I.B.2.; S&N Pet. 32–34.

Polaris also is redundant of Arthrex on the Federal Circuit’s judicial “fix.” Compare Arthrex Pet. i,

with Pet. for Cert. i, Polaris Innovations Ltd. v. Kingston Tech. Co., No. 19-1459 (U.S. filed June 30, 2020)

10

(“Polaris Pet.”) (presenting same two questions as Arthrex). Polaris contends that Arthrex did not “preserve[ ] its objection to the Arthrex remedy.” Polaris

Pet. 14–15. But in its supplemental brief before the

panel below, Arthrex argued against severability on

the basis that Congress would reject “a regime in

which patent judges could be removed at will.” C.A.

Dkt. 67 at 19. Arthrex thus is a better vehicle than

Polaris—or any other case—for deciding the principal/inferior Officer question and questions about the

Federal Circuit’s “fix.”

Accordingly, if the Court grants review on only

one or the other of the questions presented in the government’s petition, the best vehicle is Arthrex.

II. THE COURT

PETITION.

SHOULD

GRANT

ARTHREX’S

Arthrex’s petition presents two questions challenging, respectively, the propriety and efficacy of the

Federal Circuit’s decision to sever APJs’ for-cause removal protections. Arthrex Pet. i. Arthrex also proposes that the solution to any constitutional defect lies

solely with Congress, and not this Court. Id. at 33–

34. Of course, the Court need not address any of these

issues if it concludes that APJs are inferior Officers.

But if the Court were to hold that APJs are principal

Officers, then it would be efficient to address the consequences of that ruling in the same case. Accordingly, S&N agrees that Arthrex’s petition should be

granted—although S&N does not agree with Arthrex’s positions on the merits.

11

A.

APJs’ Removal Protections

Presumptively Severable.

Are

Arthrex’s first question presented is whether the

Federal Circuit erred in severing APJs’ statutory restrictions on removal. Arthrex Pet. i.

1. The power to remove an Officer is only “incident to”—not determinative of—“the power of appointment.” Myers v. United States, 272 U.S. 52, 110

(1926). Thus, an official’s status as a principal or inferior Officer dictates what type of removal restrictions are permissible, not the other way around.

Where this Court has considered the constitutionality

(and severability) of removal restrictions, therefore,

the issue was always whether Congress’s imposition

of those restrictions violated the separation of powers.

See, e.g., Seila Law LLC v. CFPB, No. 19-7, 2020 WL

3492641, at *9 (U.S. June 29, 2020); Free Enter. Fund

v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477,

508 (2010).

If the Court concludes that APJs are inferior Officers, Arthrex’s first question would be moot. As the

Court recently reiterated, “certain inferior officers

with narrowly defined duties” may be subject to one

layer of for-cause removal protections. Seila Law,

2020 WL 3492641, at *4; see also Free Enter. Fund,

561 U.S. at 498. S&N submits that APJs fit comfortably within that category, and their removal protections offend no separation-of-powers principles. There

is thus nothing to sever.

If, however, the Court were to conclude that APJs

are principal Officers, then it would face whether Congress transgressed the separation of powers by affording them limited protections from removal. Although

principal Officers generally must be removable at will,

this Court has recognized an exception for certain

12

multi-member adjudicatory bodies. Humphrey’s Ex’r

v. United States, 295 U.S. 602 (1935); cf. Free Enter.

Fund, 561 U.S. at 507 n.10 (not deciding constitutionality of removal restrictions on ALJs who “perform adjudicative rather than enforcement or policymaking

functions”). More recently, however, the Court indicated its unwillingness to expand the Humphrey’s Executor exception beyond the unique situation addressed in that case. Seila Law, 2020 WL 3492641, at

*10. Thus, if APJs are principal Officers, deciding

whether their removal protections are unconstitutional would require the Court to enter “‘a field of

doubt.’” Id. at *11 (quoting Humphrey’s Ex’r, 295 U.S.

at 632).

2. Assuming this Court reaches the severability

question, Arthrex has not carried its burden of showing that the Federal Circuit’s decision to sever APJs’

removal restrictions was inconsistent with congressional intent.

Arthrex argues that severance is impermissible

because APJs’ removal protections are “essential to

independent and impartial adjudication.” Arthrex

Pet. 24. S&N agrees that both the Administrative

Procedure Act and the Due Process Clause ensure the

neutrality of administrative adjudicators. See, e.g.,

Ward v. Vill. of Monroeville, 409 U.S. 57, 61–62 (1972)

(due process requires “neutral and detached” decisionmakers); Ramspeck v. Fed. Trial Exam’rs Conference, 345 U.S. 128, 131 (1953) (noting the APA was

enacted to prevent agency adjudicators from being

“mere tools of the agency concerned”). But this Court

has never held that removal protections are required

to ensure such neutrality.

13

Unlike Article III judges, who are independent of

the political branches by constitutional design, administrative adjudicators—including APJs—“‘exercis[e]

the executive power.’” Oil States Energy Servs., LLC

v. Greene’s Energy Grp., LLC, 138 S. Ct. 1365, 1374

(2018) (emphasis added; citation omitted). IPRs and

other post-grant review proceedings provide the Executive with “‘a second look at an earlier administrative

grant of a patent,’” ibid. (citation omitted), and Congress elected to assign this second look “to the very

same bureaucracy that granted the patent in the first

place,” Thryv, Inc. v. Click-To-Call Techs., LP, 140 S.

Ct. 1367, 1374 n.7 (2020). As a result, APJs are necessarily dependent on, and accountable to, the agency

(and ultimately the President) in a variety of ways.

See S&N Pet. 18–21; U.S. Pet. 18–22. And unlike administrative law judges in other agencies, APJs’ compensation and tenure are subject to control by their

superiors. See, e.g., 5 U.S.C. § 7513(a); 35 U.S.C.

§ 3(b)(6); S&N Pet. 20; U.S. Pet. 19.

Contrary to Arthrex’s submission, the relevant

question is not whether Congress intended APJs to be

protected from removal. See Arthrex Pet. 24. Rather,

the “critical question” is whether Congress would

have passed the rest of the statute without the removal protections. Seila Law, 2020 WL 3492641, at

*21 (plurality op.). In other words, Arthrex’s first

question really asks whether the Federal Circuit

erred in concluding that Congress “would have preferred a Board whose members are removable at will

rather than no Board at all.” U.S. Pet. App. 27a. The

answer to that question is “no.”

This Court has “developed a strong presumption

of severability.” Barr v. Am. Ass’n of Political Consultants, Inc., No. 19-631, 2020 WL 3633780, at *8

14

(U.S. July 6, 2020) (plurality op.); see also id. at *9

(“decisive preference” for severability). Indeed, the

Court has twice decided to sever removal protections

after finding them unconstitutional. Seila Law, 2020

WL 3492641, at *21 (plurality op.) (CFPB Director);

Free Enter. Fund, 561 U.S. at 508–10 (PCAOB members). Arthrex’s rejoinder is that “Congress’s long history of providing tenure protections to administrative

[adjudicators] was not at issue in Free Enterprise

Fund or Seila Law. But it is the whole ball game

here.” Arthrex Pet. 24 n.3. While Arthrex will lose

that game, S&N does not dispute that it should be

played.

B.

The Constitution Does Not Require

Unilateral Review Of Individual

Decisions.

Arthrex’s second question presented is whether

the Federal Circuit erred in concluding that severing

APJs’ removal protections was sufficient to cure any

Appointments Clause violation. Arthrex Pet. i. The

body of Arthrex’s petition makes clear that its second

question presented is the mirror image of the government’s first question and S&N’s sole question: What

does it take to make—or, in Arthrex’s formulation, unmake—a principal Officer?

Arthrex argues that an official can be an inferior

Officer only if all of her decisions are subject to unilateral review by a principal executive Officer. Arthrex

Pet. 25–28, 32–33. S&N and the United States have

already explained why this position is wrong. S&N

Pet. 22–24; U.S. Pet. 25–26. The Appointments

Clause is about political accountability—not error correction. This Court has never treated case-by-case review, or any other particular element of supervision,

as dispositive. See S&N Pet. 21–23. To the contrary,

15

this Court has deemed as inferior Officers administrative adjudicators who could enter unreviewable decisions on behalf of their agency, see Freytag, 501 U.S.

at 882—and their “near-carbon copies” with similar

“last-word capacity,” Lucia, 138 S. Ct. at 2052, 2054.

Arthrex also ignores all the other mechanisms by

which the Director and the Secretary direct and supervise APJs’ work, including by effectively reviewing

their decisions. See S&N Pet. 18–19; U.S. Pet. 18–22.

Moreover, APJ decisions are also subject to review by

principal Officers in the Third Branch—the judges of

the Federal Circuit. See 35 U.S.C. § 319. The Director

may intervene in any such appeal, id. § 143, and cannot cancel or confirm any patent claims until the Federal Circuit has had the opportunity to review the

Board’s final written decision, id. § 318(b).

At bottom, Arthrex argues that the principal/inferior Officer distinction should turn solely on whether

a superior executive Officer can unilaterally review

particular decisions, while S&N and the government

advocate a more holistic approach to supervision.

This Court has stated that an inferior Officer need

only be supervised “at some level,” Edmond v. United

States, 520 U.S. 651 (1997), as APJs indisputably are.

That is enough to confirm that they are inferior Officers—with, or without, their removal protections.

C.

The Court Has A Variety Of Tools To

Redress Any Constitutional Defect.

Arthrex’s petition includes as a coda an argument

that does not directly correspond to either of its questions presented, but rather appears to follow from

both of them together: “Given the constitutional defect, the court of appeals should have left the solution

to Congress, rather than trying to recraft the statute

itself.” Arthrex Pet. 33.

16

Here, too, Arthrex is bucking the tide of this

Court’s precedents. As this Court has explained, “the

‘normal rule’ is ‘that partial, rather than facial, invalidation is the required course.’” Free Enter. Fund, 561

U.S. at 508 (citation omitted). The Court’s strong

preference is thus to “use a scalpel rather than a bulldozer in curing . . . constitutional defect[s].” Seila

Law, 2020 WL 3492641, at *21 (plurality op.). In two

recent cases, for example, this Court opted to cure the

constitutional defect not by blowing up the entire

agency, but by severing the relevant Officers’ forcause removal protections. See id. at *21–22; Free Enter. Fund, 561 U.S. at 509–10.

Arthrex apparently hopes that Congress would

“abandon inter partes review entirely” if this Court

were to identify a constitutional problem with respect

to APJs. Arthrex Pet. 34. But this Court should be

loath to allow Arthrex to “ride a discrete constitutional flaw . . . to take down the whole, otherwise constitutional” review system. Barr, 2020 WL 3633780,

at *9 (plurality op.); see Oil States, 138 S. Ct. at 1369

(sustaining the IPR system against a frontal constitutional attack).

In keeping with its prior teachings, the Court

should instead “‘try to limit the solution to the problem,’ severing any ‘problematic portions while leaving

the remainder intact.’” Free Enter. Fund, 561 U.S. at

508 (citation omitted). If this Court were to identify

one or more constitutional defects in the statutory

scheme governing the appointment and removal of

APJs, there would be a number of surgical solutions

available—depending, of course, on the nature of any

problem.

For example, if the Court were to conclude that

APJs are principal Officers, the Court could sever the

17

provision requiring that APJs be appointed by the

Secretary of Commerce. 35 U.S.C. § 6(a). This would

pave the way for presidential nomination and senatorial confirmation, allowing the Board to continue functioning once the APJs are reappointed.

Similarly, if the Court were to agree with the Federal Circuit that APJs’ removal restrictions are unconstitutional, it could sever those restrictions—as the

Court did in Seila Law and Free Enterprise Fund. See

Seila Law, 2020 WL 3492641, at *21–22 (plurality

op.); Free Enter. Fund, 561 U.S. at 509–10. Indeed, if

the Court were to adopt the Federal Circuit’s threepart test for principal-officer status, then it might also

agree with the Federal Circuit that such severance is

sufficient to cure any Appointments Clause violation.

Alternatively, if the Court were to agree with Arthrex that APJs are principal Officers solely because

the Director cannot unilaterally review their decisions, the Court would have several potential options.

The Court could clarify the availability of review by

panels of non-APJ executive Officers—i.e., the Director, Deputy Director, and two Commissioners—

whether by confirming that the Deputy Director and

Commissioners effectively serve at the Secretary’s

pleasure, see 35 U.S.C. § 3(b)(2)(C), or by noting that

the Commissioners can be required as part of their annual “performance agreement,” ibid., to rehear Board

decisions if called upon to do so. The Court also could

sever the provision requiring that any rehearing be

conducted by three-member panels, see id. § 6(c)—

thereby allowing (without requiring) the Director, a

principal Officer, to rehear individual decisions by

himself. Although the Federal Circuit declined to

adopt a similar proposal, U.S. Pet. App. 24a, that

18

would be a far more limited intrusion into the congressional design than Arthrex’s proposal to throw out the

baby with the bathwater.

Even if the Court were to agree with Arthrex that

“Congress is far better positioned to determine how

best to revise the statute,” Arthrex Pet. 33, that would

not mean blowing up the IPR system in the meantime.

The Court could instead stay its judgment for a sufficient time to “afford Congress an opportunity” to take

any necessary action without impairing the Board’s

ongoing functions. Buckley v. Valeo, 424 U.S. 1, 143

(1976) (per curiam); accord N. Pipeline Constr. Co. v.

Marathon Pipe Line Co., 458 U.S. 50, 88 (1982).

To be clear, S&N’s position is that there is no constitutional “problem” to “solve” in this case—if the

APJs are inferior Officers, then all these other issues

evaporate. If, however, the Court were to find any

constitutional shortcomings in the extant system of

administrative patent review, S&N submits that it

could consider a range of potential alternative solutions in addition to those adopted by the court below

or advanced by Arthrex.

19

CONCLUSION

The three petitions for writs of certiorari in Arthrex (Nos. 19-1434, 19-1452, 19-1458) should be

granted and set for consolidated briefing and argument.

Respectfully submitted.

CHARLES T. STEENBURG

NATHAN R. SPEED

RICHARD F. GIUNTA

WOLF, GREENFIELD & SACKS, P.C.

600 Atlantic Avenue

Boston, MA 02210

(617) 646-8000

MARK J. GORMAN

SMITH & NEPHEW, INC.

7135 Goodlett Farms Parkway

CORDOVA, TN 38016

(901) 399-6903

MARK A. PERRY

Counsel of Record

KELLAM M. CONOVER

BRIAN A. RICHMAN

MAX E. SCHULMAN

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 955-8500

MPerry@gibsondunn.com

JESSICA A. HUDAK

GIBSON, DUNN & CRUTCHER LLP

3161 Michelson Drive

Irvine, CA 92612

(949) 451-3837

Counsel for Respondents

Smith & Nephew, Inc. and ArthroCare Corp.

July 23, 2020